Enjoy This Rally! But...
Ever since I wrote last week's post "Did the Market Just Bottom?" it's as if someone switched on a big neon bullish light.
"Jeff, how high could this go?" and "Jeff, is it too late for me to get in?" - seem to be the prevailing questions. Folks have clearly switched from hugely bearish to massively bullish in just a few days' time.
When I posted this chart a week ago, I noted we could get to the upper red trendline very quickly. And here we are...
![](https://www.goodbuyreport.com/content/images/2022/08/IXIC_2022-08-04_07-03-29.png)
For example, this rally has pushed the goodBUYs portfolio (for premium subscribers) into the green for the first time this year. We've spent the last 7 months avoiding taking big losses, far outpacing our small-cap growth fund benchmark in the process:
![](https://www.goodbuyreport.com/content/images/2022/08/image.png)
It's further proof of what I constantly note to subscribers...take small losses and let your winners run.
So here's my advice... enjoy this rally. Put some money to work.
But as I noted last week, invest with a skeptical eye. If this rally has "legs" - meaning its a bull market advance that's going to rise, fall back, then rise again and slowly work its way higher - you'll have plenty of time to start investing your portfolio in a responsible way.
But...
The stock market is all about uncertainty. No one can guarantee that this is NOT a bear market rally, for a number of important reasons (more on those below).
But it wouldn't be the first time that a huge rally got investors all lathered up, then pulled the rug out. For example, in the midst of the 2000-2003 bear market, the S&P 500 index (down 28% from its all-time highs at the time), turned and soared 20% in 6 weeks - which only served as a setup for a more vicious decline:
![](https://www.goodbuyreport.com/content/images/2022/08/SPX_2022-08-04_07-29-54-1.png)
So I'm not saying to be bearish - just skeptical.
In the past week, some downtrodden sectors of the market have started to wake up and move higher. Small-cap stocks, for example, are starting to do very well in the last few days. I'm hopeful we'll see others start to outperform in coming days.
But as I noted in a tweet a few days ago, a few important sectors - banks & homebuilders - still haven't moved up.
![](https://www.goodbuyreport.com/content/images/2022/08/image-1.png)
Maybe they will start doing better later this week or next. But unless or until they do, it could be signaling that this market rally has a lot of sparkly fireworks but not necessarily a lot of substance.
We won't know except in the fullness of time.
Jeff
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